Jim Eagles: How holiday costs fly up

The old saying "there's no such thing as a free lunch" applies every bit as much in the travel business as it does everywhere else in life. Not only do you pay for that airline lunch - witness the price difference between full-service airlines that serve meals and budget airlines that don't - but you pay for everything else along the way, including the use of the airport facilities.

That is what was behind Air New Zealand's outburst last week about plans for a $76 million upgrade of Wellington Airport.

The cost of the upgrade, as Air NZ chief executive Ralph Norris points out, "is ultimately going to be paid by those travellers using the airport ...

"For more than three years now we have committed to giving our customers everyday low fares and we will continue to stand by that commitment in the face of the greed shown not only by Wellington airport but some of its peers around the country."

It's understandable that airlines such as Air NZ are getting upset at the fact that while they are desperately cutting costs to lower fares and survive in the face of fierce competition, their efforts are undermined by tax-hungry governments and monopoly airports loading on extra charges.

The latest example is an imminent double-whammy at Auckland International Airport. At present the $25 departure charge includes a $5 security levy to cover the cost of screening for weapons and explosives, plus civil aviation safety activities. From October 1 the Government has decided to almost double that to $9.40 and to make airlines collect it (in other words, add it to the ticket price).

But the departure tax won't be going down by $5, because the airport company says it needs the extra money to pay for its own $125 million upgrading programme.

To be fair, that decision has been - reluctantly - accepted by the Board of Airline Representatives in New Zealand, but it still represents another cost increase to passengers. Indeed, most of the time the poor old passenger is hit several ways.

Airport parking charges are invariably high and food and drink usually costs more because of high rents the operators have to pay the airport company.

Airlines have to pay to use airports and, needless to say, include the cost of that in the price of your ticket. Airports also charge passengers directly for use of their facilities and they are getting steadily higher.

Most governments now impose airport security levies to cover the cost of combating terrorism.

And Sydney even imposes a charge of $3.90 a passenger because of the noise made by landing planes. Not to forget that these charges mostly apply at both ends of the journey so that in a return trip a passenger may be hit four times.

Say, for instance, you decide to have a family holiday in Sydney.

Air New Zealand's Tasman Smart Saver fares are only $139 each way - or $278 return - and some special transtasman fares are a lot lower.

But even that figure includes four different airport charges - and that is only the start of what you have to pay.

Air NZ itself imposes a $50 insurance and fuel surcharge each way, which immediately adds $100 to the trip.

If you take your car to the airport it will cost $24 a day to leave it in the short-stay international car park (you think that's bad? The short-stay domestic car park is $32 a day) or $13 a day in the uncovered long-stay car park, which is quite a walk from the terminal.

Then, of course, you have to pay the international departure tax of $25, which basically goes to the airport company (and, to add to the irritation, unlike nearly everywhere else in the world you can't pay for it with your ticket but have to queue at the airport branch of the BNZ).

On top of that the airport company charges the airline about $2.12 for each passenger who uses the terminal plus an aircraft fee, which equates to between $3.90 and $8.50 a head. These, naturally enough, are incorporated into your ticket price. And, don't forget, from October 1 the new security charge of $9.40 will be added as well.

Landing at Sydney Airport will set you back $3.90 for the Sydney noise tax plus Sydney Airport charges the airlines an extra $22.30 a passenger for using the terminal, all of which is part of your fare. The pain doesn't stop when your holiday is over either, because on the way out the Australian Government imposes a departure charge of $42.70 a head and the airport hits airlines with the terminal fee of $22.30 a passenger going as well as coming.

Arriving back home is relatively painless although Auckland International Airport still requires the airlines to fork out those terminal and aircraft charges, which are added on to your ticket yet again.

After that you probably can't afford to buy an expensive cup of coffee and a doughnut at the airport because you still have to pay your parking charges.

By the time you've added up all those bits and pieces, a journey that on the face of it was going to cost only $278 - and even that fare includes some airport charges - has climbed to nearly twice as much.

That's not to say airports don't have to expand and upgrade to satisfy customer needs.

But it does mean that as monopoly operators they have a particular obligation to ensure that expansion plans really are required by their customers and are not merely exercises in self-aggrandisement.

It also means airport companies need to be watched to ensure they don't abuse their monopolies by earning excessive profits. Air NZ has pointed out that Infratil, a major shareholder in Wellington Airport, gets a 20 per cent higher profit margin from that investment than from its holding in Glasgow's Prestwick Airport, which faces more competition.

Monopolies are best curbed by providing competition where feasible - which is why the proposal to develop an international airport at Whenuapai ought to be encouraged - but failing that the Government needs to listen to Norris' call last week "for a review of the regulations that govern the New Zealand airport industry".